Updated: Jul 20, 2018
The IT department has always been dubbed as a cost (profit-sucking) center. It is however imperative for companies to bear the high cost associated with it to operate efficiently. So, what can we do to reverse this equation? Well, you got it right: “reverse it, from cost center to a profit center”.
First, you must create the demand, then establish business value, then charge for these extra-ordinary services rendered by your department to other areas. These services could be anything that would either generate more revenue for the business or cut cost. Just make sure that you charge appropriately and that you are cheaper than the market rate to have a captive customer base. Then, the revenue you generate from these value added services can in turn fuel your technology innovation projects to create another revenue generating service. Then the virtuous cycle goes on.
Here are some tips
1. Deliver revenue by doing what you do best - easier said than done, but definitely not impossible. IT departments can deliver revenue by doing what they are good at, like: selling project management services, telecoms services, applications development services, IT infrastructure services, and the list goes on. The focus should be: be better and cheaper than the market.
2. From support to reinvention - focus most of your energy in more strategic activities such as innovation and technology evolution, and yes charge for it. After all, if the business tries to get it from the outside, it will definitely be more expensive and it would usually take longer time to deliver because of the lack of necessary knowledge of your specific business processes which you already have. Use it as your competitive advantage.
3. Save money and spend at the same time - like in your personal life, if you just try to save money without reinvesting it, you will find out sooner than later that it’s already gone. Smart business people reinvest their money and grow it by compounding. Invest what you saved, then charge for for the new service you’ve created to have a recurring revenue stream.
4. Create an innovation fund for technology incubation as seed money - one of IT’s main role is to innovate. Being ahead of the curve in technological trends will give your IT department the trust and the necessary partnership with the business. People love innovation, this can also propel your company to differentiate itself against your competitors in this digital era.
5. Tie your budget with the business - if you got tired of preparing your CAPEX and OPEX and nothing is ever approved, then tie your budget to the business. Make the business units pay for their IT commodities like network, phones, PC’s, licenses, software, and hardware.
Once successful in doing all these, then you won’t need CAPEX and OPEX ever. The revenue stream that you can generate becomes a revenue than can fuel your technology evolution projects. This becomes a virtuous cycle and this will serve as your technology obsolescence insurance moving forward.